Tag Archives: inflation

Using Real Money

In 2024, gold went up over 20% in U.S Federal Reserve Notes (what we call the U.S. Dollar). The proper way to view it is that the U.S. Federal Reserve Notes lost significant value that year. Even though the government said that inflation was only about 3%, it didn’t even come close to what we experienced in the loss of buying power for things like gold and silver. It is clear that if everyone had saved their money in gold, they would all be much wealthier now, and this was only one year. Almost every year, inflation takes a large percentage of the value of our savings.

Gold and silver coins were intended to be the money of the United States. It is still possible to use gold and silver as money in modern life. This means that there is still a way to stop inflation. In this article I explain the problem and propose one good solution. I’m going to explain how you can get your own gold and silver account with the UPMA and why it makes sense. I’ll also show you how you can use gold and silver to buy things today.

It’s important to understand that what I’m describing isn’t just a way to invest in gold and silver. It’s a way to start saving and using it for everyday purchases and to make investments using gold and silver as money. This is what I believe will help to bring healing back to our broken monetary system.

There are many important reasons for getting out of the paper currency system:

  • The paper dollar loses value by government policy which destroys savings
  • Giving a group of people the ability to print money at will, encourages corruption
  • The Constitution of the United States says we are supposed to be using gold and silver
  • Using gold and silver as money makes it much harder to deny access to your money
  • Using physical gold and silver is more private because no one else has to know about your transactions.
  • You could be earning inflation protected interest by leasing out a gold balance to a business.

Only about 50 years ago, most banks used to store and lend money as gold and silver. The government quit backing paper dollars with gold in any way by not allowing anyone to exchange them for a specific amount of gold.

The reality is, we don’t need anyone’s permission to start doing what we know is right. We can start using gold and silver with each other now. This puts our own finances back on a gold standard. You could open a gold and silver account today. I’d like to show you one good way to do that here.

The United Precious Metals Association (UPMA) provides a way that you can cost-effectively store your money in gold and silver coins. It is an online service that gives you three kinds of accounts: a U.S Silver Dollar account, a U.S. Gold Dollar account and a Goldback account, which are real gold bills you can use as cash. The service allows you to pay for things directly to other account holders too. This means that you can do digital transactions in gold and sliver online which removes the inconvenience of delivering physical metal.

By opening a gold and silver account at the UPMA, you protect your money from inflation, inappropriate taxation and from the control of the corrupt banking system. Another great feature is that you can even earn interest on your gold and silver if you choose to do that with a portion of your savings.

These accounts are serviced by a gold and silver depository called Alpine Gold Exchange and are:

  • Easy to use online,
  • 100% insured,
  • Available to both individuals and business entities.
  • There is no cost to sign up,
  • No commitment to making or investments required,
  • No minimum balance required.

Open a Free Account

The existing corrupt financial system steals money secretly through inflation. By making money easier to borrow, governments revalue their currency by increasing the amount that is loaned into existence. This video explains more about inflation and how UPMA accounts help protect us:

The UPMA is not just a another place to store your investments in gold. It’s a completely different concept. It’s organized as a non-profit organization. It’s an association of members that has the feel of a credit union that exists for its members.

Understanding the “Zero Spread”

Did you know that most gold dealers don’t post the same prices for buying and selling? What you usually see is the price you will have to pay, not the price they would pay you (which is much lower!) The UPMA is very different. When you choose to hold your money in an account at the UPMA, they don’t sell the gold to you at one price and then only take the gold back at a lower price. This practice is called the buy/sell spread. UPMA members always get the posted rates for both buying and selling, unless you sell more that $10,000 in a month.

To be very clear, when you choose to take physical possession of your coins and then attempt to physically deliver them back, there is a market-based spread, but if you exchange back and forth from paper dollars, the posted price works both ways. The zero spread is limited.

If you exchange more than $10,000 paper dollars in a single month, you will be charged a market based spread for that. The UPMA isn’t a “trading platform”. It’s actually a financial institution for regular people who just want to use gold and silver as money. Since most people don’t spend more than $10,000 a month unless they are trying to trade, it makes sense. If you are a trader, you may want to become a coin store or something like that. The UPMA is intended to help us actually use gold and sliver.

As far as I know all gold dealers charge a spread. This is something that makes the UPMA very unique.

Considering Storage Options

I personally believe it is important to keep some of the actual metal at home. If we use it in place of cash, then you need to have some actual metal to use to pay for things. One of the problems, though, is that having a lot of cash at home, starts to become a risk. Wouldn’t it be nice to also have a place to store larger amounts that is protected from flood, fire and is both audited and insured?

The UPMA holds your money physically in gold or silver in its high-security professional storage facility. They take physical records and maintain those outside of a computer as well. Splitting your metal holdings between what you have at home and what you store in a professional facility really makes sense when you think about it.

Open a Free Account

What Using U.S. Coins Means for Taxes

The UPMA holds your gold and silver in U.S. silver and gold coins with an option to store in Goldbacks as well. This means that you are buying and selling using money not barter. It also means that you shouldn’t have to pay taxes just for spending your gold or silver money to buy things.

Unfortunately, the federal government’s enforcement doesn’t match the law. Much will have to be done by our states to hold both state and federal officials to the law and remove those who don’t.

Because of the illegal activity by government agencies and states, I still recommend that you keep track of your purchases and sales of U.S. gold and silver coins for tax purposes, unless you have a sheriff and a state that will defend you against government theft.

Pawning (Loaning Gold to Yourself)

When you use U.S. gold and silver coins to make purchases, you should not be required to pay capital gains taxes. Taxing authorities appear to be requiring that conversions from gold to paper dollars be reported on tax forms. If they decide not to recognize the transaction as a legal tender but instead as barter, the move from metal to paper might trigger the government to wrongfully assert that you must pay capital gains tax.

For this reason, the UPMA is also offering a pawn service option. It’s like loaning your gold to yourself. It does have a cost, because you must pay a pawn broker to manage the loan until you “pay yourself back” what you borrow from your account. But since you borrowed to get cash, there was no capital gain. Even though this shouldn’t be a tax consideration, it is another service provided to UPMA members to make sure that there isn’t any wrongful government interference.

Open a Free Account

So there is a safe way to store large amounts of gold.

It’s important to understand the costs too. Since gold and silver are real things, they must be stored by someone and that does have a cost. This is one way that Alpine Gold gets paid.

Storage Fees

The storage fees are .05% every month paid for in gold and silver. So, 1 ounce of gold costs .05 ounces a month. If gold was valued at $3000 per ounce, that would be $1.50 per month.

This is an important consideration, but I might add that it isn’t uncommon for the value of gold to go up more than 10% in a single year these days. Often it has been much higher than that. Paying $1.50 per month is $18 a year which is only 0.6%. The benefits clearly out-weigh the cost.

If you have invested your savings before, you know that there isn’t any investment that doesn’t have a fee (even if it is well hidden). These fees are low and clearly stated.

If you choose to hold only Goldbacks, there currently is no storage fee. More about Goldbacks later.

But there’s another very important thing you could do to avoid paying storage fees.

Getting Inflation Protected Interest

You could get paid for leasing out some of your gold. When you do that, you are not charged storage fees, and you get paid 2% in gold.

Leasing your coins is very much like having a one year “certificate of deposit” at a bank only you retain custody. It allows you to lend your money for a fixed period of time. The thing that really makes a difference is that the interest is also in gold or silver coin. This means that your investment is naturally protected from inflation. Even the interest is. That’s something that is nearly impossible to find in our paper money economy.

Leased gold is used to fund businesses. Usually, these businesses are the kind that have to keep an inventory of gold or silver in order to operate. Some of them actually mine which gives them gold or silver as a product of their business. When these businesses borrow in gold, it makes it easier for them to manage and tends to make the risk cheaper to insure.

One type of business that uses these leases to fund business is the manufacturer the makes the “Goldback”.

Golden Cash

That brings me to one of the newest local money alternatives that is also provided by the UPMA. A Goldback is a real gold monetary unit. It’s in the shape of a bill. Each one contains 1/1000 of an ounce of gold. The UPMA allows you to purchase these as well and store them in an account or have them delivered to you whenever you wish to withdrawal them.

Individuals and businesses can easily accept Goldbacks as payment. There’s even a calculator that keeps track of the average daily price. It helps you calculate the paper dollar exchange rate.

You don’t need to sign up for the UPMA or do anything to start accepting Goldbacks. They are private and a great replacement for paper cash.

Several states have decided to offer their citizens the ability to use precious metal-delimited instruments, also called specie, as legal tender in the state. This give the people of those states the ability to use gold and silver as money when they buy things there.

Open a Free Account

One of the difficulties with buying and selling with metal is that silver is heavy and gold is so valuable that you have to have very tiny coins in order to use it for every-day buying and selling.

The Goldback is a high-tech alternative to coined money. They are bills that use a modern process to put gold inside a plastic coating in very specific quantities. It’s a revolutionary new way to have and use cash.

There’s even a cartoon that teaches kinds the benefits of using real money. I found this Tuttle Twins episode to be helpful for big kids too. Now even a kid can own gold!

Legit and Fraud Protected

They are produced with technology that creates articulate designs and fraud protection making them very hard to fake. You can learn more about a third-party verification of the Goldback’s quality here.

The UPMA allows you to hold Goldbacks in your UPMA account without paying for vaulting fees at all. You can withdrawal Goldbacks from your account and have them sent to you at any time.

Open a Free Account

Getting Gold into Your Own Hands

The UPMA is holding your gold and silver but if you want, they will ship it out to you. Not only that, there are now gold ATMs cropping up around the United States. Check this out:

There are also an increasing number of businesses that are willing to exchange their goods and services for Goldbacks. There are even state government officials getting involved.

Some Notable Opinions

One of the most revealing and popular books about the fiat money system: “The Creature from Jekyll Island: A Second Look at the Federal Reserve”, was written many years ago by G. Edward Griffin. As a self-proclaimed critic of things like this, here’s what he has to say:

In this article and video, Alpine Gold and Mr. Griffin discuss the UPMA, addressing concerns and benefits.

Something More Important than Money

Having an honest money system is important, but what is more important than anything is being prepared for what happens after this life is over. It wouldn’t do any good for me to show you a way to preserve the value of your money and just let you die and and discover that God had expectations that you have failed to live up to.

This is the most important thing that I have to share because it deals with true wealth that happens after this life is over.

Please download my free PDF of the gospel of John and read it carefully. That will pay me more than anything.

If you are interested in getting a UPMA account, using my referral link to sign up will help me. This gives me a very small portion of your vaulting fees (up to a limit) which rewards me for telling you about the UPMA.

Sign Up Here

To join the UPMA you can use my link to sign up and it will help me. The sign up process is surprisingly easy! Just tap or click on UPMA below

Inflation Protection and Taxes

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Tax PaperIt’s important to understand that inflation protection is removed when taxes are applied.  Current tax rules disregard inflation, and as a result it’s easy to demonstrate that inflation can cause all of our interest on a TIPS and some of our principle to be lost through taxation alone.

When we consider our inflation adjusted returns, we can easily see that the real tax rate climbs to astronomical levels.  This simple example shows how easy it is for taxes to use up all of our real returns.

A Revealing Example

Let’s consider the effects of taxes on our inflation adjusted gains.  These adjusted gains are what finance professionals call our “real” gains.

Let’s use the actual TIPS that is being offered as I write this and our current inflation rate.  Our current inflation rate is actually 2.2% but we will use 2% make it easier and more conservative.  If you buy a $1000, Ten year TIPS with a 0.5% interest rate and experience inflation that averages about 2% during that time, the overall real gain would be 5% over 10 years and the overall inflation adjustment if it stayed the same during that period would be 20%.

After 10 years, your principle would be adjusted to $1,200 and you would have been paid about $60 in interest.  The problem is that you are not taxed on the just the $60.  The tax rules require that you be taxed on the $60 real gain + the $200 of principle adjustment.  If you are paying taxes at a low 15% rate, the rules say that you must pay 15% of $260 or $39.  Since you really only earned $60 in real value, you will have paid 65% in taxes.

That’s a very high tax rate for sure, but look what would happen if we had an unusual amount of inflation.  This is something we need to consider because our intention is to protect ourselves from both average and unusual changes in inflation.

Let’s change the average inflation to 5%.  After 10 years, your adjusted principle would now be $1500 and your 0.5% interest would be $75.  Your tax on $575 at 15% would now be $86.25.  Since you only really earned $75, taxes will have taken all of your real gain and forced you to take a loss of $11.25 on top of that.  That comes out to be a real interest rate of -0.1125% and a real tax rate of 115%.

In a taxable account, the greater the inflation, the less the protection.  I can’t honestly say that it provides any protection at all because a taxable account amplifies inflation.  It is wrong to assume that our savings is inflation protected just because we hold a TIPS.

One Safe Place

If you open a tax advantaged account such as a 401k or an IRA at a brokerage that allows you to hold TIPS within it, your savings is guaranteed to be protected.  That’s because all growth in a tax advantaged account is either not taxable or tax deferred.  This means that all inflation adjustments to your TIPS principle will only be taxed once, either before you put it into a Roth IRA or 401k or after you take it out of a traditional IRA or 401k.

The combination of a tax advantaged account and TIPS is currently the only option that I am aware of that will guarantee inflation protection to a person attempting to save money in United States.

I Bonds are Only Guaranteed in Certain Cases

I Bonds are tax advantaged in that they are exempt from state and local taxes.  That makes them an even better option than other “safe” investments.  This still does not protect them from a total loss of real gains through federal taxation on inflationary gains.  There is one more advantage though.  If an I Bond is used for tuition, it is tax free and becomes a great way to save for a child’s education.

It is also possible to sell your I bonds at a time in which your taxable income is below your exemption allowance.  If your total income falls below the your permitted exemption, then your I Bonds are tax free for that year.

A Problem for All Investments

It’s very important for all investors to understand that this problem exists outside of TIPS and I Bonds.  As far as I know, all investments have the potential of losing all of their real gains through taxes that are amplified by inflation.  Here’s an explanation of the effects on capital gains:

It’s not just a problem for investors, though.   Inflationary gains are taxed in your very own bank account.  Your interest may be only $1 per year, and you may have actually lost $5 of purchasing power in your account.  You would think that would mean that you lost $4 in purchasing power.  Since you pay taxes on your inflationary gain of $1, it pushes the loss even lower than $4.  Inflation amplifies your taxation because the more inflation there is, the more tax you pay.

Important Things to Remember about Tax Advantaged Accounts

If you have the ability to have 401k, I highly suggest that you do that.  IRAs only allow you to contribute $6,000 per year for those under the age of 50 and $7,000 per year for those over 50.  401k’s allow you to hold far more depending on your income.

If you are a high-income individual.  You currently have no guaranteed protection from inflation for savings that I know of.  It may be a good idea to consider moving your investments overseas.  There are several nations that don’t have capital gains taxes including Mexico and New Zealand.

How Inflation Protected Mutual Funds Fail to Protect (Part One)

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Egg Balanced on ForksInflation protected bonds are a great way to protect your long-term savings and it’s easy assume that inflation protected mutual funds or ETFs are just as good, but that’s actually not the case.   There’s increased risk to savers who hold bonds in a mutual fund.  In this two part series, I explain some of the risks and why I don’t recommend using funds for this purpose.

The Benefits of Mutual Funds

Mutual funds are pretty convenient to an investor.  They are relatively easy to buy and sell and are managed by professionals.  They allow us to leave our investments in highly qualified hands.

Mutual funds are also very well advertised.  You can find out a lot about them because they are in almost everyone’s 401k. Mutual funds can be a win-win situation for the novice investor and the experienced money manager.  The problem with mutual funds and ETF’s is that they are inherently more risky than bonds because they have added exposure to market forces.

Preservation vs. Opportunity Investments

When we are saving, we intend to preserve our money for a specific point in time.  Mutual funds help us take advantage of investment opportunities, but they don’t commit to pay at a point in time.  We are able to pick a good management team and pay them to pick the best time to buy and sell stocks and bonds, but they don’t promise that our money will be there when we need it.

As I mentioned in the article: “Stressed about Savings? Divide and Conquer!”  it’s very helpful to divide your money into two separate parts before you start.  Mutual funds can be a valuable part of the opportunity side of your investing, but too risky for the preservation side.

The Safety of Bonds

Bonds have traditionally been a much better place to store money for long term savings.  That’s because bonds are loans with a due date.  When a bond matures, you get all your money back.  I discuss this at length in the article: “Why Bonds are Smart for Savings”

The danger bonds have is the possibility that your money won’t be paid back to you at all.  We do have to consider who we are loaning our money to.  Risky bonds are not good investments for savings either.  You can diversify them, but they are still not good preservation tools because you may not get all your money back when you need it.  Good quality bonds, however, can be seen as a good method of saving for the long term as long as they are adjusted for inflation. That’s because you have a reasonable commitment that you will be paid on time.  Mutual funds, on the other hand, don’t come with a commitment to pay anything.

Bond Funds

As safe as bonds are, you would think that putting bonds into a mutual fund or an ETF would produce the best of both worlds, but that’s not the case.  A surprisingly risky set of things happen when you put bonds into a fund.

When you invest in a bond fund, you are not owed anything anymore!  When you own a bond directly, the bond issuers legally owe you money on a specific date.  In a mutual fund, the bond issuers owe the fund money, but they don’t owe you anything directly.  This is very important to understand.  If you intend to insure your savings, then it’s better to choose a method of savings that provides you a direct guarantee.

You might be wondering why a bond fund would not be able to pass along the bond issuer’s guarantee.  There are some valid reasons.

Funds are Mutual, Bonds are Not

It’s important to understand that a bond fund is owned by a group of people.  This creates a problem for savers.  In order for a bond to preserve your money, you must hold that bond until it matures.  There is no money available until a bond matures, unless you are willing to sell the bond at the current market rate.  Funds, on the other hand, allow shareholders the ability to buy and sell at any time.  If all of the other shareholders had the same intentions as you, it might work well to use a bond mutual fund, but that isn’t the case at all.  There are some shareholders that may actually sell their shares before the bonds in the fund mature.  If enough people do that at the same time, it could force the managers to sell some of the bonds at a rate that is lower than what was paid for them.  As you patiently hold your shares, the value in the fund would go down because of what others decide to do.

Bond Market Exposure

What this tells us is that by putting a bond into a fund, it exposes the fund to the bond market which can be as unreliable as the stock market.  If the bonds are always held to maturity, they have no exposure to the bond market and there is nothing to worry about.  I have found that bond funds usually follow bond market prices, not bond maturity values.

Let’s consider some of the risks the bond market exposes an investor to.  Remember that the bond market is just a place to buy and sell loans that haven’t been paid back yet.  The market is subject to what buyers and sellers perceive about the future.  Since these loans are dependent on an interest rate,  investors are exposed to the potential that the bond’s interest rate will seem small in the future compared to newer bonds and other investments that become available.  Since investors want to hold loans with the largest payout, the loans with the lower interest rates would lose market value.  They could even lose enough value that they temporarily fall below the original principal.  If a fund manager is forced to sell at that point to pay a mutual fund shareholder, it deeply hurts the fund.  Since you own a share of that fund, it hurts you too.  When you buy a bond directly, you can hold the bond and ignore the market.

Click here to go on to part two…

The Effects of Inflation

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Hamburger with fire background

Meditations (Pixabay)

Whether intended or not, one of the bad effects of a government-regulated monetary system, is that it creates a disconnect between money and the real things we need to buy.  Take food for instance. If we were use hamburger gift certificates instead of the money we use today, we would know that we would get the same amount of food for our money today as we would after leaving the certificates in a box for 10 years.  Somehow, we’ve managed to mess up our monetary system such that it is significantly more difficult to depend on it for real needs… like eating or clothing ourselves.

Let’s consider the effects of inflation using terms that we can actually eat.  Let’s assume that you had put a 10 hamburger certificate under your mattress in the year 2000, only let’s also assume that someone has allowed inflation to eat your hamburgers without your permission over time.  How many hamburgers do you think you would be able to buy today with an inflation adjusted 10 hamburger certificate?  By 2017, your 10 hamburger certificate would only buy you about 5.68 hamburgers.  This is quite typical, inflation is usually eating away at our savings.  There’s a website that makes it easy for you to see how the costs of things have changed over time as a result of inflation.  It provides a calculator that allows you to enter your own dates and amounts and see the effect for yourself using the government inflation data.

Try it at:  US Inflation Calculator

The problem is that once money is disconnected from something real, it can change in value quietly over time.  For much of the United States’ history, our money has been buying less and less over time.  There were periods in which inflation went backwards.  Yes, that’s called deflation.  That might sound good at first, but those times are often harmful as well.  One of the most notable times that this happened in our history was the Great Depression.  If deflation is happening to money, it’s likely that it’s because people don’t have jobs or money to pay for things they need.

Whether our problem is inflation or deflation, disconnecting money from something that is real is not a very good savings plan.  In order to plan, you kind of need to know how many hamburgers you will get to eat, shoes you will get to buy or tanks of gas you will be able to fill.  Thankfully, there are still some tools at our disposal that can help us combat the effects of inflation like I Bonds and TIPS.  They’re not quite as easy as putting money under your mattress, but at least they are available.